Through this appeal under Section 136(1) of the Income Tax Ordinance, 1979 (the repealed Ordinance) the Revenue has challenged the judgment of the Income Tax Appellate Tribunal (the ITAT) in ITA No. 1561/LB/1997, dated 28.5.1998. The only issue involved is the correct interpretation of clause (c) of sub-rule (2) of Rule 3 of the Income Tax Rules, 1982 (now repealed), which is as under:- "(c) "employee" includes a director of a company working whole time for one company."
Now if the assessee fulfilled the criterion of being an "employee" in terms of the clause (c) above, he would be entitled to certain exemption on perquisites etc.
2. The controversy arose in the following facts. The respondent/assessee filed his Return of Income Tax for the assessm ent year 1991-92, declaring total income of Rs. 182,236/- which included property income of Rs. 63,136/- and salary income of Rs. 1,19,100/-. Detail of salary was declared as under:--
(1) M/s. Khyber Tractor (Pvt.) Ltd.: Salary . Rs. 75,000/- House Rent Allowance = Rs. 33,600A Conveyance Allowance = Rs. 3,900/- Utilities Rs. 7,500/- Total Rs. 7,500/- Rs. 1,20,000/-
(2) M/s. Sargodah Service Limited: Salary =Rs. 40,200/- House Rent Allowance = Rs. 16,200/- Conveyance Allowance = Rs. 3,600/- Total Rs. 60,000/- The Assessing Officer, apart from other additions, added the amount of allowances/prerequisites towards the taxable income of the assessee on the ground that the assessee was not whole time director of one company in terms of clause (c) of sub-rule (2) of Rule 3 of the Income Tax Rules, 1982; and as such total income was assessed at Rs. 3,30,000/-.
3. The assessee challenged the order of assessment, before the Commissioner of Income Tax (Appeals) who deleted the addition of the perquisites with the observation that at one time the assessee was associated only with one company; and therefore, he fulfilled the condition of being director, working whole time for one company. The Revenue challenged the findings of the first - Appellate Authority before the Income Tax Appellate Tribunal (ITAT). The ITAT observed in its judgment that the assessee worked for six month for one company and next six months for the other company; and while he worked for one company, he did not work during that period, for the other company, it was held that being director of more than one companies but actually working only for one company, could not deprive a director from the benefit of exemption on perquisites.
4. We have heard learned counsel for the Revenue, and have also perused record.
5. Clause (c) above nowhere stipulates that simply being director in more than one companies at one time, will oust such director from the definition of an "employee", it only says that he should be working "whole time for one company". The ITAT rightly observed that as a fact at one point of time, the assessee worked only for one company, and during the relevant period he neither rendered his services nor received any benefits from the other company. The assessee in the instant case though remained associated, with two companies, in one assessment year, but he claimed benefits regarding one salary and emoluments thereof. The assessee is entitled to exemptions on prerequisites to the extent of one company. Exemptions are claimed with regard to benefit derived, in respect of one company. Assessee has neither received benefit nor claimed exemption with regard to two companies at one time. Exemption is claimed with regard to one salary and benefit thereof. The assessee thus falls within the definition of employee, within the contemplation of clause (c), sub-rule (2) of Rule 3.
6. Judgment cited by the appellant-titled as "Commissioner of Income Tax v. Mazhar Hussain"
(1988 PTD 563) does not qualify to the facts of case in hand.
7. For the foregoing, the appeal has no merit and the same is accordingly dismissed.